Cross-Border Payments from India: SWIFT, Nostro, Vostro and a Worked Example

SWIFT messaging is the network that carries the payment instructions between banks, and it is important to understand that SWIFT does not move money, it moves messages about money. When a bank in India sends a payment to a bank in the United Kingdom, it sends a pacs.008 message under CBPR+, the ISO 20022 customer credit transfer that replaced MT103 for cross-border payments when coexistence ended on 22 November 2025. That message contains the sender, the beneficiary, the amount, the currency, the value date and the charge instruction, and the receiving bank acts on that message to credit the beneficiary. The actual movement of funds happens through correspondent bank accounts, not through SWIFT itself. A BA must document the SWIFT message types used, the mandatory fields, the character set rules, and the handling of a message that is rejected by SWIFT for a format error. A single missing field in the message can delay a payment by days. Correspondent banking is the relationship that makes cross-border payments possible, because most banks do not have branches in every country. An Indian bank that wants to pay in US dollars maintains an account with a bank in the United States, and that account is called a nostro account, which means our account with you, from the Indian bank perspective. From the United States bank perspective, the same account is a vostro account, which means your account with us. When the Indian bank sends dollars abroad, it instructs its correspondent bank to debit its nostro account and to pay the beneficiary bank, either directly or through further correspondent banks. A BA should document the correspondent bank for each currency, the account numbers, the cut off times, and the fees charged by each intermediary bank in the chain. Nostro and vostro accounts are the same account seen from two sides, and the distinction matters for reconciliation. The Indian bank maintains a nostro account in dollars with its correspondent bank in New York, and it records the balance in its own books, while the correspondent bank records the same account as a vostro account in its books. Every payment, fee and interest entry must match between the two records, and the nostro reconciliation team compares the bank statement from the correspondent bank against the internal ledger every day. Differences arise from fees deducted by intermediary banks, from value date differences, and from payments that were sent but not yet credited. A BA working on a nostro reconciliation project must specify the matching keys, the tolerance, and the ageing of breaks, so that a difference of even a small amount is investigated and not written off casually. Charges in a cross-border payment can be shared in three ways, and the charge instruction is part of the SWIFT message. In an OUR instruction the sender pays all charges, so the beneficiary receives the full amount, but the sender pays a higher fee. In a BEN instruction the beneficiary pays all charges, so the amount credited is reduced by the fees deducted along the chain. In a SHA instruction the sender pays the charges of the sending bank and the beneficiary pays the charges of the receiving and intermediary banks, and this is the most common option. A BA must document the charge options offered to the customer, the fee schedule for each option, and the disclosure that the customer sees before confirming the payment, because a customer who expected to receive 10,000 dollars and received 9,950 dollars will raise a complaint if the charges were not explained. A worked example brings the whole flow together. A customer in Bengaluru wants to send 5,000 US dollars to a daughter studying in London for education fees, at the bank branch or online. The customer provides the university admission letter, the PAN, the beneficiary account details and a FEMA declaration under LRS, and the bank checks the 250,000 dollar annual limit. The bank converts the amount at the day rate, say 83.50 rupees per dollar, so the customer pays 4,17,500 rupees plus a fee of 1,000 rupees and taxes. The bank sends a pacs.008 through SWIFT to its correspondent bank in London, which debits the nostro account and credits the beneficiary bank, and the daughter receives the funds in two working days, minus intermediary charges if the instruction was SHA. BA test cases must cover the limit check, document validation, rate lock, SWIFT generation, and customer notification at each stage.